SavingStar makes paperless coupons national

Monday

Nov 12, 2012 at 6:00 AMNov 24, 2012 at 10:35 AM

By Peter S. Cohan WALL & MAIN

One of the more interesting things that can happen when a company is backed up against the wall is that it figures out a way to use its strengths to go after a new market. For example, if a company has been selling its products to stores but the stores stop buying its product -- that company is in deep trouble. However, if the stores still trust the company, it may be able to salvage itself by selling those stores a different product that makes their customers better off.

This comes to mind in considering the fate of Waltham-based SavingStar -- a “national 100 percent digital” grocery savings service that makes coupons work without paper. SavingStar is linked to grocery and drugstore loyalty cards of 24,000 stores in 50 states at “over 100 retailers.” And SavingStar boasts that it's “the only national eCoupon service with Apple iPhone and Android apps.”

In a November 2 interview with CEO David Rochon, I learned that his previous job as president of Upromise.com helped lay the groundwork for SavingStar. Upromise is a service that helps people save for college that was bought in 2006 by student loan packager, Sallie Mae.

In 2008, Sallie Mae was being hit by financial problems. Mr. Rochon came up with the clever idea of using Upromise's existing grocery partnerships — that added to consumers' savings when they bought groceries — to introduce “eCoupons.”

In 2010, Mr. Rochon spun off the grocery business from Upromise and called it SavingStar, to open make eCoupons available to “all consumers, linking manufacturers of the products to shoppers interested in using their coupons.”

According to Mr. Rochon, “SavingStar is the only service that banks your eCoupon rewards so that they accumulate in your account and you can choose how you'd like to get paid out (either a deposit to your bank or PayPal account, an Amazon gift card, or a donation to American Forests).”

SavingStar simplifies the process of redeeming coupons. As Mr. Rochon explained, SavingStar gives consumers the benefit of coupons digitally without the need “to clip or print, to mail in rebate forms, and to type barcode numbers from their purchases into a reward-tracking website.”

Mr. Rochon believes that SavingStar is targeting a large opportunity — with $7 billion in grocery coupons alone each year — noting that couponing companies have significant market valuations. He noted that “Valassis has a market cap of $1B and Coupons.com raised $200M last year. Yet neither of those companies has the digital footprint that SavingStar has.”

Moreover, the typical family goes to the supermarket 1.8 times a week and, as Mr. Rochon said, “the idea that you can save money is ubiquitous. SavingStar makes saving money game-like — which is very appealing. And our process is much more efficient than paper coupons which get counted in Mexico.”

SavingStar gets paid by the manufacturer. For example, Nestle pays SavingStar when a consumer engages with the product, say, Toll House Morsels. SavingStar “gets a fee when the consumer redeems a coupon,” says Mr. Rochon.

He points out that packaged goods companies like Procter & Gamble, Unilever, and Hershey spend $50 billion a year on advertising and promotion. And “digital can play an increasingly important role in how manufacturers reach consumers and track their actions at the point of sale.”

SavingStar has raised capital and hired a good-sized staff. Since 2010, it has raised a total of $18.25 million and has a staff of 36. He expects that number to reach about 56 by 2013. And he is looking for people with skills in software development, marketing, finance, legal, and sales (with expertise in packaged goods and retailing).

He believes that SavingStar will achieve his goal of getting “every supermarket, drug store, and alternative format retailer in its network.” And a reason he thinks that SavingStar will gain share is that it will enable local stores to gain access to that $50 billion that packaged goods companies spend on national advertising and promotion — in addition to the $100 billion that they already spend locally.

If SavingStar can achieve this ambitious goal, Mr. Rochon thinks it will be a much larger company and could go public — an outcome that would surely please his investors.

Peter Cohan of Marlboro heads a management consulting and venture capital firm, teaches business strategy, and is the author of 11 books – most recently, “Hungry Start-up Strategy: Creating New Ventures with Limited Resources and Unlimited Vision.” His column runs Sundays and Wednesdays on telegram.com. His email address is peter@petercohan.com.